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We often struggle to remember the renewal dates or due dates to make payments for different services, from credit card bills and subscription fees to loan repayments and SIPs (Systematic Investment Plans).
So, an auto debit facility on your credit or debit card is a convenient and hassle-free option. It will automatically pay your dues timely without remembering multiple dates.
Thus, let’s explore what is an auto-debit facility? We will go through how it works, including key highlights of the RBI’s guidelines.
What is Auto Debit?
Auto-debit is a facility that credit/debit card issuers offer to allow scheduling recurring payments for auto-deduction on a set date. Whether school fees, insurance premiums or loan repayments, it will automatically deduct an amount that you pre-set. Therefore, this facility lets you transfer the stress of remembering multiple payment dates every month.
The auto-debit facility also you to set a limit above which no amount deduction can happen from your cards even if you consented to the auto-debit. Thus, it restricts transfers beyond your limits to prevent unauthorised debits.
ADDITIONAL READ: What is UPI Auto Pay?
How Does Auto Debit Facility Work?
You need to first activate the auto debit facility from the card issuer’s app. Otherwise, you can activate it from your net banking to set the standing instruction for the payments.
Once you activate the facility, the payment deduction will take place without OTPs (One-Time Passwords) at its scheduled monthly date.
However, make sure you have enough balance in your bank account to avoid overdraft charges of insufficient balance. This is necessary to make a successful transaction of automatic deduction. You can also set the maximum amount to be debited. Hence, beyond that limit, no auto-deduction will be done from your bank.
How Does it Help Businesses?
The auto debit facility helps merchants retain customers and also reduce the administrative burden. While, it is the also most convenient, flexible and time-saving option for customers.
| Convenient | Allows you to authenticate your recurring payments without having to enter OTPs up to ₹15,000 per transaction |
| Flexible | The auto debit facility allows you the flexibility to activate or deactivate the service anytime. |
| Avoids Late Fees | You can avoid late payment fees since the amount is automatically debited monthly. |
| Time-saving | You don’t need to remember dates and amounts for such payments, which saves a lot of your time. |
E-mandate and Auto Debit Card Payments
E-mandate is a service that provides underlying infrastructure to merchants/businesses to collect recurring payments from customers in India.
Initiated by the RBI and NPCI (National Payments Corporation of India), e-mandate is the permission of your customers to receive recurring payments from them.
Thus, when you set your auto debit facilities, you sign an e-mandate for the receiver giving consent to make recurring payments to their accounts.
ADDITIONAL READ: The Future of Card Storage and Card-Based Recurring Payments in India
Key Highlights of the RBI’s Guidelines
In October 2021, RBI issued new auto-debit payment guidelines to help customers safeguard their accounts from unauthorised transactions. These were introduced to ensure their awareness regarding the rules.
Let’s look at the key highlights of the RBI guidelines:
- OTP verification: Every transaction under the auto-debit facility needs to be authorised with an OTP. However, RBI has allowed transactions up to ₹15,000 can be carried out under such facilities without OTPs.
- Opt-in and opt-out facility: Card companies must allow customers to opt for the auto-debit facility anytime. They must also enable customers to opt out of the facility whenever they want.
- Transaction limits: Every auto-debit facility must have a transaction limit. Therefore, it will ensure that no such transaction will be carried out above the set limit.
- Notification: Card companies must inform the customers about the auto-debited transactions. They can notify either through SMSs or emails, or any other mode of communication agreed upon.
- Dispute resolution: Customers should approach credit card companies for any disputes. The RBI instructs the companies to resolve the dispute within 90 days.
The Bottom Line
Although the auto debit facility eases out your recurring payments, you should always be careful of the amounts that are getting debited. Moreover, you should also be taking care in checking whether you have sufficient balance in your account.
